Wednesday, November 2, 2011

Derby County's American Dream

In the notoriously competitive Championship it is perhaps unsurprising that so many clubs lose patience with their managers in their eagerness, almost desperation, to reach the promised land of the Premier League. Indeed, four have already exited stage left this season, including two former England managers in the form of Sven Göran Eriksson and Steve McClaren. So, when Derby County’s board extended Nigel Clough’s contract until 2015, it somehow seemed more extraordinary than the customary news of another manager’s sacking.

Admittedly the Rams made an excellent start to the season, winning their first four games, despite an absence of star names in their squad, so it should probably not be classified as a major shock. Even though Derby found the going more difficult in October, they still sit in the play-off positions with nearly a third of the campaign gone, so promotion remains a possibility, albeit very far from a fait accompli.

When Clough arrived at Derby in January 2009, he spoke of a 10-year plan and reinforced this approach when he signed the new contract, “From day one we knew this was going to be a long-term project and it is still very much a work in progress.” He has received solid backing from the club’s owners, notwithstanding the indifferent results in the last three seasons, when Derby have finished 18th, 14th and 19th respectively.

Indeed, Derby fans will hope to avoid a repetition of last season, when a promising start in which they briefly looked like realistic promotion contenders merely foreshadowed an awful run of two wins in 18 games which turned them into relegation candidates.

"Steve Davies - Going Up?"

The Rams’ support has become accustomed to having their hopes dashed in recent years, as the thrilling victory in the Championship play-off final against West Bromwich Albion in 2007 only paved the way for a nightmare time in the Premier League, when the team collected a paltry 11 points, winning just once and finishing rock bottom.

Even Billy Davies, the manager who guided Derby to promotion, admitted that the club had been promoted at least a season too early, as he left “by mutual consent” in November. His successor, Paul Jewell, fared little better, lasting only a year before he resigned in December 2008. Clough thus became the ninth Derby manager since 2001, so it is understandable that the board would seek a period of stability at the helm.

While performances on the pitch have not exactly set the world on fire, it should be acknowledged that the board has at least improved the state of the club’s finances, slashing the wage bill, though this has been at the expense of weakening the squad, notably when two reliable goalscorers were sold: experienced striker Rob Hulse to rivals QPR in August 2010 and Scottish international Kris Commons to Celtic in January 2011.

"Theo Robinson - Hand in Glove"

This has caused some fans to call for more investment with a few protests against the board’s parsimony. Nigel Clough was moved to observe, “I think we need about half a dozen good, established Championship players to take us forward.” There have been many new arrivals this summer, including a trio of loan deals that were made permanent: England U21 goalkeeper Frank Fielding from Blackburn Rovers and two forwards, Theo Robinson from Millwall and Jamie Ward from Sheffield United.

However, many of the signings left the fans distinctly under-whelmed, even though players like Jason Shackell (from Barnsley) and Craig Bryson (from Kilmarnock) figured prominently in Derby’s promising start to the season. There’s little doubt that it is difficult to secure promotion without the necessary investment, but on the other hand it is by no means impossible, as evidenced by both Norwich City and Swansea City going up last season on a shoestring budget.

Older supporters will remember a glorious period in the early 70s, when the legendary Brian Clough (Nigel’s father) and Peter Taylor led the Rams to their first ever League Championship in 1972 with a team featuring the prolific Kevin Hector and the commanding Roy McFarland. They reached the semi-finals of the European Cup before being controversially eliminated by Juventus.

"Glory Days"

Clough and Taylor left the club following a disagreement with the directors, but former player Dave Mackay repeated their feat by winning the title in 1975, boosted by the signings of Francis Lee and Bruce Rioch. Again, they (briefly) shone in Europe, including a memorable 4-1 demolition of Real Madrid that included a hat-trick from the darling of the terraces, Charlie George.

Since then, it is the boardroom battles that have dominated coverage of Derby County, as there have been frequent financial problems, spiced up with an embarrassing legal case. They were once owned by the notorious “bouncing Czech” himself, Robert Maxwell, who sold the club to Lionel Pickering, a local newspaper businessman, in 1991 after relegation from the old First Division and shortly before his demise, which was officially described as “death by accidental drowning.”

There followed a period of relatively high investment in new players, culminating in promotion to the Premiership in 1996. Pickering anticipated the trend of clubs building brand new stadiums by moving to Pride Park in 1997 and for a while the club flourished in the top tier. However, relegation in 2002 proved to be disastrous to the club’s finances, as key players such as Malcolm Christie, Chris Riggott and Danny Higginbotham had to be sold. This did not prevent the club’s principal debtor, the Co-Operative Bank, from putting it into receivership in October 2003.

The club was then rapidly sold for the princely sum of £3 to the mysterious ABC Corporation, based in Panama, who provided a loan of £15 million, albeit at an exorbitant rate of interest of 10% a year. At the time, former chairman John Sleightholme described them as “a mixture of persons, at home and abroad, who have asked to remain anonymous.”

"Pride Park (In the Name of Love)"

The ownership trio was finally revealed to be Sleightholme, Jeremy Keith (subsequently appointed chief executive) and Steve Harding. Dubbed “The Three Amigos” by the local press, this was very much a case of “out of the frying pan, into the fire” and they were met with a storm of protest by two separate supporters groups, the Rams Trust and the Rams Protest Group, who did not fully trust their motives – with much justification. In April 2006, they eventually succumbed to the pressure and sold the club to a group of local businessmen, led by Peter Gadsby, and (perhaps inevitably) known as “The League of Gentlemen”.

Years later, the fans were shown to be right, as Keith was jailed, along with co-conspirators, Andrew Mackenzie, the finance director, and Murdo Mackay, the director of football, in a squalid tale of false accounting and conspiracy to defraud. Each of them had claimed £125,000 in commission for their “services” in helping to secure a loan for the club, but these payments were never approved by the board.

At that stage the bank loans and money owed to the ABC Corporation had reached a worrying £50 million, but Gadsby’s consortium brought the debt down to more manageable levels. Eighteen months later in October 2007, Gadsby stepped down as chairman and was replaced by former Hull City owner, Adam Pearson, who was identified as the man who could bring in overseas investment to take Derby to the next level.

"Fielding - Our Frank"

In spite of the calamitous results in the Premier League, Pearson quickly succeeded in finding new investors in the shape of General Sports and Entertainment (GSE), who bought 93% of the club via the parent company Gellaw 101 Limited in January 2008. Pearson continued to act as chairman and retained his 7% stake until October 2009, when he left the club to pursue “new challenges.”

On their website, GSE modestly describe themselves as “the only company with the breadth and depth of experience, knowledge and contacts to truly maximise the power of sports and entertainment”, though their record before acquiring Derby County was rather thin, largely consisting of a successful turnaround story at the Fort Wayne Wizards, a Minor League baseball team in Indiana that they bought in 1999 and sold in 2006.

Again, there was an issue over the identity of the owners, as incoming chairman Andy Appleby said, “GSE will be managing the investment of members of the USA consortium they have brought together” without revealing exactly who those members were. The key players on the Derby County board are Appleby himself and the chief executive Tom Glick. Both of these have sports experience in the NBA: Appleby as a Senior Vice President at the Detroit Pistons; Glick as Chief Marketing Officer at the New Jersey Nets.

In fairness, this American takeover was funded by cash, as opposed to increasing borrowing, so is more akin to Randy Lerner’s acquisition of Aston Villa than the Glazers’ purchase of Manchester United. As Pearson said, “the key thing is that the money coming to Derby is not repayable.” The deal was described as being worth £50 million, but only around £16 million of that actually went to the previous directors with the rest being used to take on the club’s existing debts.

"Glick - Tommy Gun"

Given Derby’s troubled background with new directors, it was entirely understandable that the fans were cautious in their welcome. Once bitten, twice shy. Nevertheless, Nigel Clough has tried to reassure supporters, “There was a lot of scepticism, people saying they are only here for the short-term. But all that has gone – what they’ve done is what they’ve said they’re going to do. They’ve put money into the club and all the off-field activities have been spot on.”

It is easy to see what the football club has got from the deal, but what inspired GSE to invest their money in Derby County? Appleby has spoken of the club’s tremendous potential, great support and excellent stadium, which is fair enough, but eyebrows were raised when GSE’s stated that their aim was “to establish the Rams as a global brand and a Premier League force of the future.”

While applauding the ambition, the immediate reaction is that this objective is not only a tad unrealistic, but is also the wrong way round, as it would be better to get to the Premier League before trying to establish a global presence. Even Appleby admitted, “It will be less easy in the Championship.” It is true that “the entire world watches English football”, as Appleby put it, but that level of global exposure is only offered by the Premier League.

In fact, there have been a few contradictions in GSE’s approach. One moment, they unassumingly talk of producing incremental improvements from their “knowledge of best practices in management, marketing and selling.” The next moment, they’re shouting the odds, “Our goal is to become the best-run football club in the world. I’m not sure Derby could be a Manchester United, but it could certainly be in the top six or seven of the Premier League.”

"Jason Shackell - Eyes Down"

Similarly, when they arrived at Derby, they were highly complimentary about the incumbent leadership, “We respect the manager (Paul Jewell) and Adam Pearson. They’ve forgotten more about English football than we know.” Of course, both of these respected gentlemen have now gone.

GSE are on far safer ground with their financial strategy. Buoyed by the parachute payments received after relegation from the Premier League, they have lived up to their promises to reduce liabilities and the wage bill, though the jury is still out on whether they have built a squad good enough to achieve promotion.

They have emphasised that they have “a sensible and sustainable plan” to take the club back to the Premier League. Appleby said, “We will provide the resources necessary to be successful, (but) we don’t want to spend money foolishly.” The 2009 annual report put this another way, saying that the club would “operate within its means” and “not wildly speculate with the future.”

To be fair, this does not automatically sound the death knell for Derby’s promotion hopes. As chief executive Tom Glick explained, “It has been proven time and time again… that you can run a responsible club and you can also be in the play-offs and achieve promotion.”

The reality is that without substantial investment from GSE, Derby County would struggle to find any more money to spend on new players, as they rarely make profits. In the last six years, the club has only reported a profit twice, on both occasions due to special circumstances. In 2006 the £51,000 profit was entirely due to a £7 million exceptional item due to a loan restructuring. As the accounts said, “No-one should be under any illusion that the business was losing in the region of £7 million a year.” Similarly, the £1.8 million profit in 2008 was driven by the much higher television revenue in the Premier League.

That said, the £2.2 million loss in 2010 represents steady progress compared to the £14.9 million loss reported the previous year. Revenue actually slightly declined by £1.5 million, so almost all of the improvement came from player costs, as the wage bill was cut by £5.7 million and player amortisation was reduced by £4.4 million.

However, offloading players from the wage bill has come at a price, as Derby have consistently made losses on player sales (£4.5 million in the last three years) and have had to impair (write-down) player values. On the other hand, the progress the board has made in reducing debt is reflected in the reduction in annual interest payments from £3.8 million in 2005 to £0.7 million in 2010.

"Kilbane - We need to talk about Kevin"

The club’s losses are covered each year by additional investment from the owners, but they have also been effectively subsidised in the past two years by the Premier League parachute payments: £11.8 million in 2009 and £12.4 million in 2010. These have now come to an end, so Derby will have to cover this hole somehow from 2011 onwards. Although there is some scope to raise revenue, this essentially means a further reduction in wages.

Like all football clubs, Derby’s operating profit is influenced by non-cash items such as depreciation and amortisation. In fact, in 2010 they were actually cash profitable, as their EBITDA (Earnings Before Interest Taxation Depreciation and Amortisation) was a reasonable £4.9 million, but this is unlikely to be the case in 2011, due to the loss of the parachute payments.

However, as Liverpool’s owner, John W Henry, said, “I don’t think you go into sport to make a profit.” That’s certainly the case in the Championship, where the vast majority of clubs make losses with only four reporting a profit before tax in 2009/10 and one of those, Burnley, had the benefit of Premier League money. The total losses in the Championship worsened for the sixth consecutive year to a record of around £130 million, while the total net debt rose to £875 million.

In fact, Derby’s loss of £2.2 million was one of the better financial results with six clubs reporting losses above £10 million, the worst being Sheffield United at £18.8 million. As the 2009 accounts stated, “In comparison to the club’s peers in the Championship, the club is in a very healthy state.” Tom Glick went further, “If other clubs decide to lose tens of millions of pounds, that is up to them, but what we are committed to doing is building a stable club that can consistently perform at a high level.”

By the way, the size of the loss appears to have little bearing on a team’s chances of success, as the three promoted clubs in 2011 represented all points on the spectrum: QPR made a large loss, but Norwich City only had a small loss, while Swansea City were actually profitable.

As we have seen, Derby were one of the Championship clubs that benefited from parachute payments, which helped them to their sixth place in the revenue “league table” for 2009/10. As might be expected, the three clubs that were in the Premier League the previous season (Portsmouth, Hull City and Burnley) had the highest revenue (between £45 and £60 million), while the next three teams (Middlesbrough, Reading and Derby County) still had the benefit of parachute payments.

That significant financial advantage was lost last year, though Football League chairman Greg Clarke has argued that the effect is not necessarily so important, “Largely the parachute payments are absorbed by the club paying their debt and players. Last year three clubs came down and did not make the play-offs.” This is true, but the previous season was a different story with Newcastle and West Brom returning to the Premier League at the first attempt.

Given Derby’s lowly position in the Championship, it could be argued that they have under-performed recently, especially in 2008/09 and 2009/10. However, this might be a little misleading, as Paul Jewell famously said that the previous regime had already spent the first year’s parachute payments before relegation.

Nevertheless, even excluding parachute payments, Derby would have had higher revenue than all three promoted teams, almost twice as much in the case of Swansea City. In other words, a well-managed and organised team can still succeed in the face of financial disparity.

Revenue over the last three years has been distorted because of one season in the Premier League, which produced a record high of £49 million in 2008, followed by the parachute payments impact. Excluding this factor in 2010 would reduce total revenue from £29.8 million to £17.4 million and make TV the smallest revenue category at £3.6 million, behind commercial income of £7.5 million and match receipts of £6.3 million.

However, it should be noted that both of these revenue streams actually fell in 2010, particularly match receipts by £1.9 million (24%), which was “mainly a reflection of the success the club had in the previous season’s domestic cup competitions.” Although the big boys tend to not take the FA Cup and Carling Cup seriously, they can represent important money-spinners for others not so fortunate.

Television money in the Championship is mainly sourced from the Football League central distribution of £2.5 million that is made to all clubs, which was increased last season, plus a £1 million solidarity payment from the Premier League.

In 2010/11, Derby’s parachute payment disappeared, but the Championship payments increased to around £5.2 million, as the solidarity payment increased £1.2 million up to £2.2 million and each Championship club was given an additional £0.5 million as their share of the parachute payments for Newcastle and WBA, because those two clubs went straight back up to the top tier.

However, the new Football League three-year TV deal that kicks off in the 2012/13 season will be £69 million lower than the current contract at £195 million, a reduction of 26% or £23 million a season, reflecting what Greg Clarke called, “a challenging climate in which to negotiate television rights.” As there was no interest from BBC, ITV or even ESPN, the only game in town was Sky, who could get away with a much lower bid. The annual reduction for each Championship club has been estimated at £766,000 by Ipswich chief executive, Simon Clegg.

Although TV has been the main driver of revenue growth at football clubs, it has only really been keenly felt in the Premier League. This is why people refer to the Championship play-off final as one of the most lucrative matches in world football with the value estimated at £90 million. Even if the promoted club came straight back down, it would receive £40 million TV income plus £48 million parachute payments over the next four years (£16 million in each of the first two years, and £8 million in each of years three and four) plus additional gate receipts and commercial revenue.

Of course, if it finished higher in the Premier League, the club would receive even more TV money and every season survived adds another £40+ million to the coffers. It’s incredible to think that just one place in the football pyramid can make such a difference. Given the spectacular difference in revenue, it is understandable why some clubs push themselves to the absolute limit to secure promotion, though it’s a dangerous game, as only three clubs go up every year, leaving another 21 disappointed.

One concern is that the club might eat into that higher revenue by increasing wages and other costs, but the net effect is still likely to be positive. If we look at the three teams that were promoted to the Premier League in 2008/09 (using the last available figures from 2009/10), we can observe this phenomenon with Wolverhampton Wanderers, Birmingham City and Burnley, but all three of them went from operating losses in the Championship to profits in the Premier League.

Where Derby do score well is in attendances, as they are one of the best supported clubs in the Championship. In 2010/11 their average crowd of 26,000 was only behind Leeds United, even though this represented a 3,000 drop over 2009/10. In fact, Derby enjoyed the 15th highest attendances in England last season, ahead of six Premier League clubs. Derby’s brief sojourn in the top tier produced a stunning average of 32,400, but this was actually surpassed last month when a sell-out 33,000 crowd watched the Rams draw 1-1 with league leaders Southampton.

Derby have frozen their season ticket prices for six years in a row, though this year supporters had to renew before the early bird deadline of 30 April. This is quite generous compared to other clubs, especially as the cost of the VAT increase has been absorbed and the price freeze applied even where seats were re-categorised to a higher priced area.

There’s no doubt that Derby were ahead of the game when they built the splendid Pride Park stadium in 1997 and they now have a splendid arena that has hosted a full international match and several England U21 games.

Derby’s commercial income of £7.5 million is made up of commercial activities £2.9 million, sponsorship and advertising £2.3 million, merchandising £1.6 million, programme sales £0.2 million and other receipts £0.5 million. In 2010 the shirt sponsor was changed to buymobilephones.net, replacing Bombardier, in a three-year deal. Financial details were not disclosed, but it is reportedly the largest sponsorship deal in the Rams’ history worth a seven-figure sum. The kit deal with Adidas runs until the end of the current season.

This is pretty good for a club in the second tier. Indeed, Tom Glick commented, “We know we are generating more than almost every club in the Championship.” However, the commercial boom that GSE promised when they bought the club in 2008 has yet to happen, as commercial income has actually fallen each year since then (admittedly after relegation from the Premier League).

On the costs side, the directors’ report in the accounts highlight the tricky balance that the club is striving to achieve, particularly in 2008, “The cost base of the club has been restructured in line with those of similar sized Championship clubs, but not to the detriment of the club’s ambition of returning to the Premier League.” Fine, but the large loss in 2007 was justified as “the cost of the investment… in a squad capable of challenging for promotion.”

The wage bill that year, when promotion was achieved via the play-offs, amounted to £17.3 million, but in 2010 (after three years of wage inflation) it is down to £16.4 million and has been further reduced in 2011, so the question is whether this is enough to mount a sustained challenge?

In fairness, in 2007 Derby’s wages to turnover ratio was a completely unsustainable 125%. To place that into context, big-spending Manchester City’s ratio is “only” 107%. The board has improved this ratio to a very respectable 55%, which is the third best in the Championship. However, and stop me if you’ve heard this before, this is largely due to the impact of the parachute payments. Without this, the ratio would be up to an uncomfortable 95%, hence the desire to keep cutting the wage bill.

In 2009/10 Derby’s wage bill of £16.4 million was around mid-table in terms of the Championship wages league with eight teams paying between £14 and £17 million. Tom Glick has said that the wage bill will come down to £9-10 million, but my guess is that he was referring purely to the players’ salaries, so the total cost will be a bit higher than that.

This is certainly achievable, given the departures of high earners such as Hulse, Commons and Robbie Savage since the 2010 accounts were published. In some cases, accounting losses have been made when offloading players, e.g. Claude Davis and Roy Carroll, in order to get them off the wage bill. Glick would actually like to go further, but he has found it difficult to move on surplus players such as goalkeeper Stephen Bywater and defender Dean Leacock, complaining of “very large wages that are non-productive for us.” Ouch.

This thrifty approach has also been reflected in the transfer market where Derby’s activity over the last four years has resulted in net sales proceeds of £1.4 million, though this is a little misleading, as there has been positive net spend in each of the last two years. Once again, this is par for the course in the Championship. Yes, many clubs have spent more, though only three have net spend above £10 million in the same period (Nottingham Forest, Hull City and Leicester City) – but equally many clubs have spent less.

However, this must feel like small beer compared to the net £22.5 million that Derby splashed out around the time of the Premier League promotion. In fairness, Derby have never been big spenders with their transfer record standing at only £3.5 million paid to Norwich City for striker Robert Earnshaw in 2007. Indeed, in the years following their receivership, they were consistent net sellers, virtually having to fire sale many of their stars.

Glick has certainly talked a good match recently, “We expect to put a side together that is capable of competing in the top six.” He added, “If the right player was available and we thought he was good value, we would be prepared to spend in excess of a Shaun Barker-type fee” (reportedly around £900,000). However, he acknowledged that not everyone bought into this undertaking when the club offered fans a money-back guarantee on their 2011/12 season tickets if they were not satisfied with the transfer business over the summer.

In the P&L, the low spending in the transfer market is reflected by the fall in player amortisation from £7.3 million in 2009 to just £2.9 million in 2010. This is the annual cost of writing down transfer costs over the length of a player’s contract.

Perhaps the crowning financial achievement is the substantial reduction in Derby’s net debt, which has been cut from £59 million in 2005 to £19 million in 2010. First, Peter Gadsby’s group waived repayment of £24.6 million in 2007, leaving GSE to take over debt of £31 million in 2008 (per Adam Pearson).

Second, GSE reduced this by £16 million (£6 million in 2008 and £10 million in 2009), so that the only real debt remaining is the £15 million bank loan with the Co-operative Bank, which is due to be repaid in 2016 (interest rate 2.5% over Bank of England base rate). The stadium is used as security for the loan, so this is often described as a mortgage on Pride Park, which is an asset valued at £55 million.

The reported debt also includes other loans of £4.7 million, but Glick describes this as “a revolving facility on a portion of the season ticket income, which shows on the accounts as an additional debt, but actually comes in and out every year.”

"Lay your hands on me"

This is an excellent position compared to many other clubs. Indeed, Football League chairman Greg Clarke observed, “Debt’s the biggest problem. If I had to list the 10 things about football that keep me awake at night, it would be debt one to 10. The level of debt is absolutely unsustainable. We are heading for the precipice and we will get there quicker than people think.” Derby would (now) appear to be an exception to that rule. As a comparison, neighbours Nottingham Forest have net debt of £63 million.

Another concern when new investors come into a football club is how much money they will take out of the club, but this is also not really an issue (yet) for Derby. Directors’ emoluments (essentially salaries) actually fell from £747,000 in 2009 to £424,000 in 2010, due to Adam Pearson’s departure. The highest paid director received £326,000, which I assume is Glick, as the chief executive normally earns more than the chairman, leaving £98,000 for (presumably) Appleby.

In addition, £189,000 of management charges were paid to GSE in 2010 (down from £375,000 in 2009) with the accounts stating that 2011 would be “materially reduced”, as there was less need to rely on third party services. Interest on loans from GSE of £152k has been accrued, but not paid.Glick also stated, “There hasn’t been a dividend yet and we’re not scheduled to pay any dividend to our North American owners.” At some stage, you’d have to assume that they expect a return on their investment, but not just yet.

In fact, GSE have been putting a great deal of money into the club via a series of capital injections, which is required as the cash flow before financing is consistently negative. Indeed, the latest accounts state, “forecasts indicate that additional working capital financing is required to enable the company to fund its business plan and to meet its liabilities as they fall due.”

My calculations suggest that GSE has put around £39 million into Derby to date, comprising £16 million to buy the directors’ shares (according to Appleby), £14.4 million equity injections (£7.7 million in 2009, £6.6 million in 2010), £1.7 million loan capital and £6.6 million working capital. The latter was reported as £5.6 million in the football club’s accounts, but I have used the £6.6 million figure from the parent company, General Sports Derby (UK) Limited.

Bearing in mind that the windfall from the parachute payments has come to an end, what will Derby’s strategy be going forward?

"Jeff Hendrick - one of the young soul rebels"

An obvious route is one followed by other clubs in a similar position, namely to invest in youth development, which is a policy Derby have embraced, increasing their investment in the academy in each of the past three seasons. Four players have graduated from the impressive Moor Farm academy this season: defender Mark O’Brien, midfielder Jeff Hendrick, forward Callum Ball and England U17 international Mason Bennett, who made the headlines when he became the Rams’ youngest ever player at 15 years and 99 days.

Commercially, the club has announced plans to develop Pride Plaza, the area around the stadium, with offices, shops and restaurants. A more ambitious development was approved four years ago, but was put on the back burner when the recession hit.

The commitment of the owners seems solid for the time being, having rejected a bid from former chairman Peter Gadsby to regain control of the club last year. Glick argued, “The owners have worked too hard to get this club in great financial shape and stable in so many other ways, and put in so much money, that to stop now would make no sense. We came here to make Derby County a sustainable Premier League club and we don’t intend to go anywhere until we have achieved that goal.”

"Ben Davies - Long may you run"

The introduction of new Financial Fair Play regulations in the Championship from the 2012/13 season should be advantageous for Derby, as they already aim to balance their books, while others have spent wildly and to a certain extent forced the agenda for other clubs. Glick, who incidentally sits on the Football league board, has confirmed that Derby will be able to exclude costs for their stadium and academy from the break-even calculation, so the Rams should be sitting pretty.

The owners’ philosophy was neatly summarised by Tom Glick, “We have a notion that it is possible to have a club that is stable financially that is also competing in the league.” The Americans can already take pride in their achievements off the pitch, but only time will tell if they can also deliver success in one of the most competitive divisions in world football. If they do manage to find that elusive balance and accomplish “more with less”, then their investment could well pay off, as Derby County clearly have a lot of potential with their fantastic facilities and large, passionate following.

Very interesting, thank you for that. As a Newcastle supporter, I get the feeling Derby's owners are using a similar approach to Mike Ashley's, right?Nice to see a club planning ahead and rewarding the perfect manager for this job with a long-term contract.

As the first poster says, I've been willing this article to happen for a while. Very informative piece and well worth the wait.

A lot of people are still skeptical about GSE and their motives. I've spoke to Tom Glick on the phone before the start of last season and had emails from Andy Apppleby. They both seem top people and the club is in safe hands. Much better than the Amigos calling the club a train set.

It remains to be seen what the penalties will be for clubs failing to meet the financial fair play thresholds and what aspects of costs can be manipulated, sorry excluded, to ensure compliance! Just being cynical but realistic about the situation given the high rewards of promotion.

Great attempt at discussing the massively complicated issue that is Derby County. After years of mis-management on and off the field, I, like many, are completely committed to this fresh approach adopted by Glick and Clough.

Onfield success breeds investment, although the club is performing superbly well thus far (and despite a series of crippling injuries), I think a play-off challenge this season may be asking a little too much.

It is important the club keep the supporters onside as with a little momentum I think the good times that were seen under messrs Cox and Smith could be achieved again

It does skip over two years' background lobbying and information-gathering that the trust achieved prior to them initiating protests in helping to bring the Amigos' to book.

The article deals rather superficially with the 20011 protests - though spontaneous, they were sustained and after-game demonstrations showed distrust and hostility to the GSE regime.

Without pressure like that, it is feasible to suggest that GSE may have 'chanced it' without investing in so many 'emergency loan' players for the run-in to 2010-11. Without Fielding, Ayala, Ward and Robinson (and to an extent, Brad Jones) it's likely DCFC would have suffered the drop.

Though good on analysis and policy, the article ignores the club's alleged quest over the past 4-5 months for a 'technical director' to reinforce the efforts of Glick and Clough in the transfer & loan markets, shovelling out the dead wood from the squad and achieving more at the task of unearthing 'bargain' quality signings.

There's no doubt that in the mid-90s George Burley's clever scouting network, albeit under the nefarious restrictions of the Amigos, still recruited players of quality in Rasiak, Idiakez, Bisgaard etc through contract loopholes and wider knowledge - which almost gained promotion against all odds!

The blog is also inaccurate regarding the 2011 S/T renewal deadline - it was moved back to May 16th (as proposed to Mr Glick in February) because fans objected to paying in advance not knowing which division the club would be playing. If you book a season ticket to theatre, opera, etc then you know the programme before you buy - and so it should be for football!

You mention the debt reductions of £6m in 08/09 and £10m in 09/10,but make no mention of the fact that the new owners borrowed £9m in 08/09 as part of the process.If the argument is that they had to borrow because £10m+ was repaid out of the first chute payment,then I would point out that £7.899m in cash was carried forward from the Prem season into 08/09.Also,Mr one liner,Jewell,fails to mention that he spent a small fortune in Jan 08-effectively spending a lot of the parachute dosh in advance.

The net debt at the end of 07/08 was £21.811m,yet you make no mention whatsoever of this.Is it perhaps because your research on capital injections shows that these started with the £7.7m in 08/09,and therefore the reduction down to c£22m net obviously owes nothing to any cash imput from the new owners?

Fantastic piece of work. Something like this enables you to take stock of the situation in the wider context. Sometimes you just can't see the woods for the trees, but this article - and a factual one at that - makes you realise what a great job Glick and GSE have done. For the first time in my life, we have owners at the club who have a genuine, long-term plan, and I for one applaud them.

I'm chuffed to bits that the numpties who protested last season didn't get their way. They are short sighted, and whilst they might think they have the best interests of Derby in their hearts, their lack of intelligence suggests differently.

I love the Rams, and our owners. Cloughie is a good judge of character, and he wouldn't have signed a new contract if he didn't like his boss.

brilliant stuff as always. Given that inter seem to be going completely down the tubes, any chance of another look at those crazy crazy kids? if only to have a look under the bonnet of jose's treble winning season.

Excellent piece as usual.Just a suggestion for the next posts, if you could check Inter's finance and a perspective about their future if they can't reach European positions as well as how they would manage to meet FFP.

Good work. With the FFP coming in how does it work in the championship? As its unlikely not playing in europe will put clubs off breaking the rules. Also I love reading these articles and if you were to cover all club protests and details I feel you'd lose the point of the blog. Keep up the enlightening work. Regards

Fantastic article. I think the discussion on the young players is very valid, as that may well be our best chance of closing the revenue gap other than gaining promotion. Ideal is developing great youngsters and gaining promotion for them to shine further, but you have to be a realist at some point in football

Praise for The Swiss Ramble

"Blogger of the Year 2013 - It’s testament to the effect that Kieron has had on the blogosphere that so many fans take his word as gospel. Putting to use his career in the world of finance, his insights into balance sheets and simple explanations of complex ideas appeal to the hardcore financial whizz and casual fan alike." - The Football Supporters' Federation